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Penalties for errors

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Under the penalty provisions in FA 2007 Sch 24, no penalty is imposed if the taxpayer has a ‘reasonable excuse’. Recent case law suggests that HMRC have been applying the penalty legislation too rigidly. There are a number of points for practitioners to consider when advising on this issue. In particular, recent decisions suggest that the words ‘reasonable excuse’ are ordinary English words to be given their proper everyday meaning and should be considered from ‘the perspective of a prudent person exercising reasonable foresight and due diligence’. Furthermore, where the tax is substantial a ‘special circumstances’ reduction (under Sch 24 para 11) may be appropriate.

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